Cautiously crafted Tk 7.97t budget tomorrow amid economic pains

Higher inflation, lower investment and forex crunch remain pains in the neck as the government goes to place in parliament tomorrow a cautiously crafted Tk 7.97-trillion new national budget.
Finance Minister Abul Hassan Mahmood Ali is expected to present the maiden budget of the Bangladesh Awami League government in this tenure.
It's also happens to be the first budget authored by the diplomat-turned-politician.
However, the government has estimated total resource mobilisation worth around Tk 5.454 trillion for financing the budget for the fiscal year 2024-25, leaving a substantial deficit.
Of the amount, the National Board of Revenue is likely to be entrusted with the responsibility of collecting some Tk 4.8 trillion for the budget effective July 01.
The outlay for annual development programme or ADP has been estimated at around Tk 2.65 trillion for the next fiscal year, according to sources at the finance division.
The proposed budget is likely to have a shortfall amounting Tk 2.56 trillion or 4.6 per cent of the gross domestic product or GDP.
Of the total deficit, domestic sources are expected to contribute more than 62 per cent or approximately Tk 1.61 trillion while Tk 907 billion is expected from external sources-in grants and loans.
Sources have said the government has planned to borrow Tk 1.375 trillion from the banking system in the next fiscal year--higher by Tk 55.05 billion from the amount in current year's original budget.
Also a target is set to borrow Tk 154 billion by selling national savings certificates in the coming fiscal, down by Tk 30 billion from that in the original budget for the current fiscal.
Economists say the size of budget is okay in view of the internal and external factors but the revenue target is a challenging one amid the slow business activity, stubbornly higher inflation, and lower imports.
They think the higher borrowing from the banking system may keep the interest rate elevated on the financial market.
"To my mind, the revenue target is too high and cannot be achieved," says Dr Ahsan H. Mansur, executive director of the Policy Research Institute of Bangladesh.
The NBR may be able to mobilise at best Tk 3.8 trillion in revenues in the current fiscal year, he points out to substantiate his scepticism.
"So, an additional Tk 1.0 trillion in higher target for the next fiscal year will be quite challenging for the NBR," says Dr Mansur.
The economist fears once the government really borrows the estimated amount from the banks, there may be "crowding-out impact" on the economy.
Dr Mansur, however, thinks an elevated-interest regime may help contain the inflation which remained high for long affecting the limited-income group of people.
Apart from the ongoing higher inflationary pressures on the economy and livelihood and depleting foreign-exchange reserves, higher unemployment and implementation of a number of reform programmes suggested by the IMF are also among the daunting tasks in his view.
Dr M. Masrur Reaz, Chairman and CEO of the Policy Exchange Bangladesh, told The Financial Express that higher deficit is a concern for the economy at the time when the financial sector has liquidity stress.
"To my mind, the spending should have been much lower to shrink the deficit."
He foretells that the private sector may face trouble to get loan once the government borrows much from the banking system.
Mr Reaz says the budget should have been designed aligning with the monetary policy. The Bangladesh Bank has now been pursing a contractionary monetary policy to contain inflationary pressure on the economy.
This happens to be the sixteenth budget in a row of the Sheikh Hasina-led Awami League government.

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